There is a lot of cutting edge computer science being used in blockchain technology and, because there are multiple blockchains and protocols being proposed and tested, there are various experiments going on at the same time. This is all very good in my view. We will eventually figure out which technologies are best for which applications and standards will emerge. I think we are three to five years away from that level of market stability, and possibly farther away than that.
One of the most interesting questions to me is whether we can figure out how to implement a proof of stake consensus mechanism in a large decentralized trustless public blockchain (ie Bitcoin, Ethereum, etc). The current consensus mechanism of choice is called proof of work and the specific proof of work implementation that is being used by most public blockchains is mining. Mining has a number of issues, most notably the massive amount of electricity consumed by miners to run these mining data centers. Other concerns with mining are centralization (a few large miners control most of the Bitcoin mining infrastructure) and exposure to 51% attacks (if one miner controls 51% of the network, they control the entire network).
Proof of stake is an alternative to proof of work and there is a lot of work being done to see if it can be implemented in a large public blockchain. The leaders of the Ethereum project have publicly stated a willingness to try to implement proof of stake on Ethereum and they are working toward that goal.
In a proof of stake system, you use the very coins/tokens that are at the heart of these systems as the “proof” that you can validate a transaction. Instead of using your capital to buy computers and electricity to run them, you just use your capital to acquire the coins/tokens and they allow you to validate transactions. This is all very simplistic, of course, but that is the heart of the idea.
I read the Proof of Stake FAQ on the Ethereum Wiki this morning. It’s an interesting (and dense) discussion of the various issues that crop up in a proof of stake approach and the algorithms and techniques that are being put forward to resolve these issues. If you are interested in blockchain technology and want to understand how all of this stuff works under the hood, you might do the same and give it a read.
I am hopeful that we will see a large public project, like Ethereum, attempt to implement a proof of stake consensus algorithm in the next year or two. Mining works. It has validated blockchain technology and allowed it to be commercialized. But my gut tells me that mining is not the best consensus system out there and that we can do better. And so we should see if we can. That’s what forward progress is all about.
